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New York’s attorney-general has urged a judge to invalidate a $175mn bond posted by Donald Trump to halt enforcement of a half-billion dollar fraud judgment against him and his businesses, arguing that it is not backed by sufficient collateral or an appropriately licensed firm.
In a filing on Friday afternoon, the office of Letitia James — who brought the civil case that found Trump vastly overstated the value of his real estate empire — said there was only “vague, incomplete, and inconclusive evidence” that enough cash had been set aside to ensure the former president’s chosen surety would not default on the bond.
The attorney-general’s office suggested the $175mn bond, which is underwritten by Knight Specialty Insurance Company, should be deemed ineffective, and Trump given another week to find an alternative backer. If he fails to post a valid bond, James could begin seizing his properties to satisfy the judgment. A hearing on the matter is scheduled for Monday.
An appeals court reduced the amount of the bond to $175mn after Trump’s lawyers claimed it would be “impossible” to secure a bond for the full amount of the judgment. He posted it earlier this month, backed by Knight, one of several companies owned by Los Angeles-based subprime auto loan billionaire Don Hankey, which does not have the required “certificate of qualification” for a valid surety in New York.
In filings to the court days later, Knight said it was a “respected, well-capitalised insurer” and that the bond was backed by a Charles Schwab brokerage account belonging to the Donald J Trump Revocable Trust, which contains just over $175mn in cash. But the attorney-general’s office said it was only provided with a single screenshot of the account’s balance. The Trust essentially retained ownership of the account and could withdraw funds at any time, James’s office added.
The attorney-general’s lawyers further claimed Knight Insurance sent “100 per cent of its retained insurance risk to affiliates in the Cayman Islands”, where “lax regulations” allowed the company to bolster its surplus, making it look safer than it actually is.
A lawyer for Knight did not immediately respond to a request for comment.
Adam Pollock, a New York lawyer who worked at the attorney-general’s office, said the filing showed James had shied away from “taking an overly aggressive stance”, and the request for a new bond was “an eminently reasonable ask”.
The biggest business controlled by Hankey’s The Hankey Group, Westlake Financial, is the US’s largest lender to independent, and often used, car dealerships, allowing the dealers to offer loans directly to car buyers at the time of purchase. Hankey’s businesses flourished during the coronavirus pandemic, as consumers, helped by government assistance, were flush with cash, and car prices were driven up by supply chain problems.
The attorney-general’s office added Knight’s management had been “found by federal authorities to have operated affiliated companies within KSIC’s holding company structure in violation of federal law on multiple occasions within the past several years”.
It referred to a 2015 matter in which the US Consumer Financial Protection Bureau ordered two of Hankey’s companies, Westlake Services and Wilshire Consumer Credit, to collectively pay nearly $50mn in restitution and fines. They also mentioned a settlement federal prosecutors reached in 2017 with two Hankey Group companies, which paid almost $761,000 to resolve claims they had unlawfully repossessed dozens of vehicles owned by former members of the US armed forces.
Trump, the presumptive Republican nominee for president, is appealing against the civil fraud judgment while he stands trial in a Manhattan criminal court for allegedly paying off a porn actor in the run-up to the 2016 election in order to conceal an affair. It is one of four criminal indictments he is facing, in addition to various civil litigation.
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